Concentrated Wealth or Democracy, but Not Both

In many uncomfortable ways, American politics now resemble those that arose late in the Roman Republic. As wealth and land ownership concentrated in few hands, a state built on the discipline of soldiers who tended their own farms became ever more dominated by fractious oligarchs. As property consolidated into huge slave-owning estates, more citizens became landless and ever more dependent on the patronage of the rich generals and landowners who increasingly seized control of politics.

In much the same way, as the wealth has concentrated in America, so, too, has the power exercised by those with money. The wealthy have always played an outsized role in our politics, but today, emboldened by Supreme Court rulings easing controls on contributions, oligarchs are dominating the electoral map in ways that have not been seen at least since the abuses of the Nixon years.

What makes the Koch brothers such great targets is that they come from an industry – energy – that itself is held in the lowest esteem by the progressive activist community and its media allies. Although they tend to be libertarian in their social views, the Kochs are notably, and not surprisingly, skeptical about climate change policies that might impact their vast oil and gas holdings as well as their industrial companies, which, in the words of former New York Times columnist Frank Rich, “spew” such unhappy products as Lycra and Dixie cups. The Kochs’ ties to the Tea Party have led reliably liberal commentators to suggest that the moguls have played the supposedly grass-roots Tea Party for “suckers.”

As they rail against the Kochs, few progressives note that the balance of oligarchic politics are increasingly shifting toward the Democratic Party. This, of course, includes the predictable Hollywood figures, such as Dreamworks’ Jeffrey Katzenberg and a large section of Wall Street, notably financier George Soros, long a major source of funding for President Obama.

These well-heeled progressives have had little to fear from an administration that, despite its occasional populist outbursts, has adopted an economic policy that has exacerbated an already yawning gap in income growth between the wealthy and everyone else. Indeed, Obama, for all his populist rhetoric, retained close ties to firms like Goldman Sachs, staffing his administration with people from, and associated with, that most-detested of Wall Street firms. Indeed the ultrarich so backed the ostensibly left-wing president that, at his first inaugural, notes sympathetic chronicler David Callahan, the biggest problem for donors was finding sufficient parking space for their private jets.

An examination of campaign contributions shows that the vast majority of America’s wealthiest households may already tilt in this direction. Among the .01 percent who increasingly dominate political giving, three of the largest contributions, besides the conservative Club for Growth, backed by Republican oligarchs, went to groups such as Emily’s List, Act Blue and Moveon.org. Liberal groups accounted for eight of the top 10 ideological causes of the ultra-rich; seven of the 10 congressional candidates most dependent on their money were Democrats.

This ideological shift among the rich, particularly the new rich, in what author Chrystia Freeland has dubbed an “age of elites,” is critical to understanding contemporary political conflict. There have always been, of course, affluent individuals who backed liberal or Democratic causes, out of a mixture of philosophy and self-interest but, for the most part, the wealthy backed Republicans. This has begun to change.

Perhaps most ominous for the Right, the biggest growth in oligarchic politics has been from the very group – the so-called “high tech community” – that has flourished under the current easy-money regime. Once primarily middle-of-the-road Republican, the tech oligarchs have moved “left” in their politics, particularly on social and environmental issues. Many also have profited, or attempt to, through “green” energy investments. The leading tech companies, mostly based in the Silicon Valley, routinely send over four-fifths of their contributions to Democratic candidates.

For the political parties, which are losing influence with every election, the rise of the oligarchs in politics represents a mixed blessing. To be sure, the tens of millions poured into the coffers of party candidates is welcomed, but at the same time, the oligarchs have become so powerful that they have altered, likely for a long time, the nominating and electing process.

Republicans, for example, must deal with the likes of casino billionaire Sheldon Adelson, whose millions kept the quixotic, and seemingly pointless, Newt Gingrich campaign alive in the most-recent presidential primary campaign. The Koch brothers and others have also supported the supposedly grass-roots Tea Party, whose opposition to the Republican establishment has roiled GOP politics since 2010 and ended up with the nomination of some weak candidates.

This year, it may be the Democrats’ chance to lament the rise of the oligarchs. At a time when economic growth and inequality are primary issues to most Americans, the presence of oligarchs all but guarantees that other issues – notably, environmental issues or social concerns like gay marriage – dominate the party’s fundraising. After all, it’s hard to imagine a party increasingly dependent on the wealthy seriously advocating, for example, for the equalization of capital gains and regular income taxes.

Nobody better epitomizes the rise of economic royalist politics in the Democratic Party than San Francisco-based hedge-fund billionaire and green-energy investor Tom Steyer. Steyer has pledged to work against any Democrat who dares express the slightest skepticism about the need to diminish use of fossil fuels, no matter the economic cost. This could prove particularly tough on Democrats from energy states, like Louisiana, Texas, the Dakotas, Colorado and Montana, who historically have supported the fossil fuel industry as a prime generator of high-wage employment, including thousands of unionized blue-collar jobs.

With Steyer pledging some $100 million to his anti-oil campaign, centered on opposition to the Keystone XL pipleline, the party is running against the popular grain. According to a recent Washington Post poll, the project is favored among the public by a margin of roughly three to one.

So, Democrats find themselves pressured to oppose something favored by a large majority, all for an issue – climate change – that barely rates as a priority among voters far more worried about their jobs and families than carbon emissions. Just as well-financed Tea Party extremists have led the Republicans to nominate some lamentable candidates, Steyer’s efforts could undermine Democratic prospects – at least outside the solid coastal precincts – by forcing party figures further toward the gentry version of the Left.

Ultimately, the biggest issue revolves not around the politics of the oligarchs but their overall potential to dominate our entire political culture. As Supreme Court Justice Louis Brandeis suggested in the last century, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

The founders, too, understood this basic truth. James Madison embraced the ideal of dispersed property – “the possession of different degrees and kinds of property” – as necessary in a functioning republic. Thomas Jefferson, admitting that the “equal division of property” was “impractical,” believed “the consequences of this enormous inequality producing so much misery to the bulk of mankind” that “legislators cannot invent too many devices for subdividing property.”

It’s time we started listening to Brandeis and the founders. Until we address this issue of concentrated economic power – be it in the hands of oil barons or tech types – our politics will continue to devolve like those of Rome in the late Republic, undermining the last vestiges of citizen-based politics. Whether or not it results in the rise of an actual Caesar, this could be a sad day for what is left of our old Republic.

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I think this is all a symptom of the same disease, one that New Geography has caught on to, but most media outlets do their best to ignore.

The disease is unstable money.

When does income inequality start increasing? 1971 Nixon Shock.

When money was a surrogate for gold we still had inflation but it was harder for the government to manipulate the currency's value without changing the dollar's convertibility ratio. Now without an anchor for our currency, whenever we have an economic downturn, the Federal Reserve immediately devalues the currency to make borrowing easier and raise asset prices. This devaluation occurs with every economic cycle. Those whose earnings are derived primary from wages cannot keep up with the Fed's inflation, only those whose money comes from investments are able to keep up. This is the source of our increasing inequality.

We do need to distinguish between "oligarchy" and "rent seeking"; and simple honest provision of goods and services for which there is honest demand, at fair prices.

I hold that the big rentiers in property and finance are guilty of the greatest evil. I do not see that "big money" that funds advocacy of free markets and competition, is rent-seeking or oligarchical behaviour at all.

"Big Oil" in the USA is certainly nothing like "Big Oil" in Russia or Mexico or Saudi Arabia. Does it really get much preference from government, in the USA, compared to other industries? Does any one company get granted a monopoly?

Margins on fossil fuel energy are small and competition intense.

But the funders of "smart growth"? BAH. Some guy owns billions of dollars worth of property portfolio, that after the smart growth policies are enacted, is suddenly worth billions more, and this is purely zero-sum wealth transfer upwards in society? The Democrats think these people are saints and the Koch Brothers are evil? BAH again.

We do seem to have a raging war brewing between the moguls of finance, technology, law, entertainment and academia vs those of more gritty industries in energy, resources, transportation and manufacturing. I do sometimes think that the SF Bay Area and the blue states in general want to drive away their working classes and empty out their second tier cities and rural areas so as to make vast parks for weekend excursions untainted by the site of rattly old pickups or people off for a deer hunt.